AkermanPerspectivesontheStateofTaxation

Businesses were pleasantly surprised to learn that the Illinois Secretary of State reduced Limited Liability Company (“LLC”) filing fees following the passage of Senate Bill 867. This bill was passed in both houses on November 7, 2017 and went into immediate effect upon signature by the governor on December 20, 2017. The fee reduction is intended to allow more businesses to register and maintain business registrations in Illinois. The reduction impacts nearly all LLC filings, reducing fees across the board. For example, the filing fee for Articles of Organization was $500, it is now $150. Similarly, the annual report filing fee was $250, it is now $75.

The Illinois legislature recently mandated electronic filings for certain sales and use and withholding income tax filings as of January 1, 2018. H. B. 0821 was passed in both houses by May 2017 and signed into law on August 24, 2017 by Governor Rauner creating Public Act 100-0303. In September 2017, the Illinois Department of Revenue published an informational bulletin, FY 2018-05-A, explaining the Department’s implementation of P.A. 100-0303. The Bulletin states that as of January 1, 2018 specific sales and use tax and withholding income tax filers are required to file certain forms electronically. Failure to file the appropriate sales and use tax forms electronically results in the disallowance of timely filing discounts/collection allowances claimed on those forms.

The United States Supreme Court has recently agreed to hear oral argument in South Dakota v. Wayfair, Inc. – a case exploring the boundaries of sales and use tax nexus. The crux of the dispute in Wayfair relates to the defining purposes and protections of Commerce Clause of the U.S. Constitution. Much of the discussion to date focuses on the importance of the Court’s decision to grant the appeal. However, there is a fascinating undercurrent yet to be addressed.

New York City faces a continuing decline in state and federal funding and increased property taxes continue to be a reliable revenue stream to fund local services. Every January 15th, the NYC Department of Finance (DOF) sends to each owner of NYC commercial real property a Tentative Assessment setting forth (i) the market value of the lot (including improvements), (ii) the actual assessed value of the lot, and, most importantly, (iii) the value upon which the lot will be taxed for the upcoming tax year. The property owner has until March 1st to challenge the Tentative Assessment determining the amount of tax to be paid on the property. If this tax appeal, often referred to as Tax Certiorari or Tax Cert, is not filed by March 1st, the owner loses any right to challenge the assessment for the upcoming tax year.

An overview of the key dates, approaches for valuation, and process for challenging findings are outlined below.

Texas has joined the growing list of states providing amnesty programs for taxpayers with unreported tax liabilities. Texas announced a temporary amnesty program that will commence on May 1, 2018 and run through June 30, 2018. The Comptroller is expected to offer further details regarding the program in the coming weeks.

On December 22, 2017, President Donald J. Trump signed the Tax Cuts and Jobs Act (Act), which beginning in 2018 caps at $10,000 the allowable deduction for payment of state and local income, sales, and property taxes. While the Act prohibits 2017 deductions for prepayment of 2018 state and local income taxes, such prohibition does not expressly limit 2017 deductions for prepayment of 2018 property taxes. On December 27, 2017, the Internal Revenue Service issued an Advisory (IR-2017-210) stating: “A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.”

In the famous Seinfeld episode titled “The Lip Reader,” George Costanza’s girlfriend breaks up with him by telling him “It’s not you, it’s me.” George famously replied, “You’re giving me the ‘It’s not you, it’s me’ routine? I invented ‘It’s not you, it’s me.'” In the recent case of Agilent Technologies, Inc. v. Colorado Department of Revenue, the taxpayer leaned on the ramblings of George Costanza to “break up” with one of its own corporate affiliates to refute a $13 million dollar assessment of corporate income taxes.

The Mississippi Department of Revenue adopted a new sales and use tax regulation articulating the Department’s position regarding out-of-state sales into the state. The regulation provides that sellers lacking physical presence in the state “but who are purposefully or systematically exploiting the Mississippi market have a substantial economic presence for use tax purposes if their sales into the state exceed $250,000 for the prior 12 months.” The regulation defines the phrase “purposefully or systematically exploiting the market” by listing examples such as television or radio advertising on a Mississippi station, advertising in Mississippi newspapers, or direct mail marketing to Mississippi customers. Any seller meeting this standard must register to collect and remit tax in Mississippi. The new regulation is effective December 1, 2017.

The Trump Administration and certain members of Congress recently released an ambitious, conceptual plan for tax reform that would drastically alter current U.S. tax law, affecting a wide array of taxpayers. The plan (called the Unified Framework for Fixing our Broken Tax Code), much like President Trump’s plan released earlier this year, does not contain abundant details. In its broad outlines, however, it is clear that this effort will attempt to impact long-standing elements of the federal tax code as well as substantially lower and/or eliminate rates across a broad swath of taxpayers.

It has long been the law of the land that a taxpayer must have a discernable physical presence in a state before it can be required to collect and remit sales and use taxes. The U.S. Supreme Court reaffirmed this bright-line test in the 1992 case of Quill Corp. v. North Dakota. In Quill, the Court held that interstate commerce would be unduly burdened if an out-of-state business were required to comply with the sales and use tax laws of thousands of state and local tax jurisdictions. Requiring a physical presence, the Court reasoned, is a constitutionally sufficient contact – or nexus – with a state or locality to impose sales and use tax collection duties. Continue Reading